THE Financial Conduct Authority will probe the motor finance industry over concerns about commission arrangements.
In 2021, the FCA banned incentives for brokers to increase the interest rate that a customer pays for their motor finance, but many customers have logged complaints claiming compensation for unfair commission arrangements struck prior to the ban, the Authority said.
Motor finance companies are rejecting most complaints because they believe they have not acted unfairly nor caused customer loss based on the applicable legal and regulatory requirements at the time, the watchdog said.
The FCA said it would use its powers under S166 of the Financial Services and Markets Act 2000, to review historical arrangements and sales across several firms, to ensure fair practice.
It said in a statement, “If we find there has been widespread misconduct and that consumers have lost out, we will identify how best to make sure people who are owed compensation receive an appropriate settlement in an orderly, consistent and efficient way.”
The FCA said it would pause the eight-week deadline for motor finance companies to provide a final response to relevant customer complaints. Consumers will also have up to 15 months to refer their complaint to Financial Ombudsman Service (FOS), rather than usual six months, the FCA said.
FOS chief executive Abby Thomas said in a statement “We’ve heard from more than 10,000 people who fear they were charged too much for their finance, and we know many more are waiting in the wings,”
Thomas said FOS has resolved two complaints where it found that the way the commission arrangement between the lender and the car dealer worked was unfair on the consumer, effectively creating a template for handling similar cases.
